Market awaits bold strategy shift from Nokia's CEO

By IBT Staff Reporter On 02/10/11 AT 10:56 AM

Nokia's wisdom in picking outsider Stephen Elop to return it to its former glory will be tested on Friday when the new chief executive reveals his plans to transform the world's biggest cellphone maker.

Following a leaked memo in which Elop candidly described the need to leap from Nokia's burning platform, speculation has intensified that he will announce a radical switch to use software from rivals Microsoft or Google.

The world's biggest cellphone maker warned on January 27 of a grim start to 2011, sending its shares plunging, but the stock swiftly recovered after Elop flagged the possible change of software strategy.

Ahead of Friday's strategy update in London, Nokia shares traded down 1.8 percent at 1055 GMT on Thursday, underperforming a 0.8 percent-weaker European technology index but still up 16 percent from their January 27 low.

Nokia has rapidly lost share in the higher-margin smartphone market to the likes of Apple's iPhone, and products based on Google's Android platform claimed the top spot from the company last quarter.

In a bid to stem the losses, Chairman Jorma Ollila brought in Elop from Microsoft last September, the first non-Finn to head the company.

The 47-year-old Canadian knows he faces major challenges: in the leaked memo he compared Nokia's position to a man on a burning oil platform, wondering whether he dares to jump.

Nokia's MeeGo platform, its would-be answer to the high-end competition, is as yet unproven, and its workhorse Symbian software has little appeal among developers.

Sources have told Reuters the company has ditched its first MeeGo smartphone project, and Elop himself said in the memo the company might get only one MeeGo device to the market this year.

After Elop raised the possibility of a change in smartphone software, many market followers expect Nokia to adopt either Google's Android or go for Microsoft's Windows Phone 7.

However, picking Android would cede some control to key rival Google, while success in the wireless industry has so far eluded Microsoft.

The Wall Street Journal reported on Thursday that Microsoft and Nokia were in talks about Windows Phone 7. Microsoft and Nokia declined to comment.

Two turkeys do not make an eagle, Google's Vice President of Engineering Vic Gundotra tweeted this week, in a reference to ex-Nokia executive Anssi Vanjoki's comment on the ill-fated 2005 merger of Siemens and BenQ's cellphone operations.

Elop is also set to unveil longer-term forecasts, after limiting financial forecasts on January 27 to the first quarter.

He could also unveil a major management shake-up, with some reports suggesting four top managers would be sacked.

If we hear tomorrow anything negative at all, the share might react very strongly, said one Helsinki-based analyst.

(Additional reporting by Jussi Rosendahl in Helsinki and Bill Rigby in Seattle; Editing by Will Waterman)